Microsoft improves virtualization licensing policy -- with a catch

After years of pressure, Microsoft has altered its virtualization licensing policy for volume license holders by lifting its 90-day reassignment rule to allow for live migration of virtual machines. But there's a catch.

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As of Sept. 1, 2008, customers can move any of the 41 Microsoft server applications licensed under a volume license agreement within a server farm as often as necessary without paying additional licensing fees, but there are limitations.

Under the new terms, Microsoft waives its previous 90-day reassignment rule so customers can reassign licenses from one server to another within a "server farm" as frequently as needed. Microsoft deems a server farm two data centers within the same country, so a virtual machine (VM) can be moved from Providence, R.I ., to San Francisco, for example, but not to a data center in Europe.

The catch to VM licensing change Prior to the change, all Microsoft licenses were assigned to physical servers. So if a VM moved to a server without an available license for a given Microsoft application, Microsoft considered the VM movement a license transfer. Once a license was transferred, it could not be reassigned to another physical host for 90 days. "This policy,"
said Burton Group analyst Chris Wolf on his blog, "has long impacted virtualization high availability and live migration."

Lifting the 90-day licensing transfer restriction across all product lines is simply the right thing to do. Chris Wolf,senior analystBurton Group

But a major catch to the new licensing policy is that it applies only to volume license holders. To boot, the new terms also exclude Windows Server operating system, Client Access Licenses and Management Licenses.

Because the 90-day license transfer restriction has been lifted only on server applications licensed under a volume license agreement, small and medium-sized businesses with individual licenses are not covered under the new policy, Wolf said.

"The catch is that it applies to volume-licensed server applications, so individually purchased applications would not be covered," Wolf explained in an email.

Since Microsoft's new policy also excludes server operating systems, an office with six Windows Server 2003 systems that deploys those OSes as VMs in a two-node physical cluster would need a total of 12 Windows Server 2003 Standard Edition licenses, Wolf reported. "You have to double your software licensing investment to run the OS as a virtual machine."

Kevin Murphy, the CTO of Canton, Mass.-based server appliance provider NEI said that the new rules don't help independent software vendors (ISVs) either.

"The new licensing is a great first step; it is something NEI as a data center will be able to leverage. But for ISVs, it isn't enough. Microsoft's volume licensing model is for IT in data centers only, so it doesn't do much for our customers who are software developers," Murphy said.

The licensing rules also apply only to third-party hypervisors that have been certified under Microsoft's 2-month old Server Virtualization Validation Program, but the major virtualization providers are covered: Cisco, Citrix, Novell, Sun Microsystems, Virtual Iron, and VMware.

For customers that complied with Microsoft's licensing rules, the new policy will reduce the number of licenses they need to support IT systems and simplify the tracking of application instances or processors because customers can now count licenses by server farm instead of by server.

But, Wolf said, "The financial impact of this announcement for most organizations is probably negligible. Many IT shops simply ignored the 90-day license transfer restriction and had never taken the step to purchase additional licenses for the sole sake of virtualizing a Microsoft application."

That said, the licensing change is a great move for volume-license holders, Wolf said. "I think many enterprises will appreciate the application licensing flexibility that your policy change has provided," Wolf said in his blog. "Lifting the 90-day licensing transfer restriction across all product lines is simply the right thing to do."

Wolf was among many industry leaders pressuring Microsoft to set the tone for software licensing on virtual machines by simplifying its policies.

Many analysts including Wolf say software licensing should be the same for virtual machines as it is for physical machines; based on the number of host machines. Companies like Novell and CA have adopted simple licensing policies to run their software in virtual environments. For instance, systems management provider CA has a "buffet" style licensing policy that Wolf likes, where users purchase licenses based on physical host, not the number of VMs.

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